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Brazilian regulators: Sony would be harmed by Call of Duty exclusivity

Brazilian competition regulator CADE says that Sony would be harmed by any Call of Duty exclusivity but not enough to cripple PlayStation's business.

Brazilian regulators: Sony would be harmed by Call of Duty exclusivity
Published Oct 14, 2022 9:28 AM CDT   |   Updated Mon, Nov 28 2022 4:34 PM CST
3 minutes & 30 seconds read time

Brazilian's economic competition regulators note that Sony would be materially impacted from the loss of Call of Duty, but at a catastrophic level for the company.

Brazilian regulators: Sony would be harmed by Call of Duty exclusivity 3

A bit ago, Brazil's CADE regulatory body had approved the Microsoft-Activision merger without restrictions. The branch had published a 76-page document (now 75 pages after a very important redaction) outlining their reasoning behind the decision.

Included in the document is discussion on Call of Duty exclusivity and what would happen to Sony if the franchise were made exclusive to Xbox. Microsoft has doubled-down on assertions that Call of Duty will remain on PlayStation, but for the sake of argument let's take a look at what CADE has to say about this situation.

It's important to note that the regulators have privileged access to data figures, sales numbers, and other information that we simply don't. While I was able to determine that Activision made $1.32 billion from PlayStation in 2021, which meant that Activision-Blizzard products generated a total of $1.89 billion on PlayStation (assuming Sony kept a 30% commission and Activision got 70%), a good portion of the required data is just not made public.

CADE rightly acknowledges that Call of Duty exclusivity would harm Sony. But this harm wouldn't be catastrophic nor would it force Sony to close its business. This is the main argument against Sony's claims of Call of Duty being an "essential franchise."

"Sony is the only player in the game distribution market for consoles that could, in theory, be harmed by Microsoft's eventual exclusivity over the distribution of Activision Blizzard content," reads page 53 of the report.

Sony made $7.93 billion from microtransactions in 2021, driven by hits like Call of Duty, Apex Legends, Fortnite, and other live games.

Sony made $7.93 billion from microtransactions in 2021, driven by hits like Call of Duty, Apex Legends, Fortnite, and other live games.

Read Also: Brazilian regulators have myopic view on subscriptions like Game Pass

Sony provided the regulators with exact earnings from Call of Duty's microtransactions. Remember that Sony made over $7.9 billion from add-on content throughout calendar year 2021, which includes microtransactions and in-game purchases.

According to CADE, Call of Duty's proportion of PlayStation add-on content revenues were "expressive, but not large enough so that their absence would force the PlayStation business to shut down. In Brazil, and other markets, anti-competition law is predicated on a simple question: Will this merger or acquisition force competitors out of business?

CADE has determined that no, the Microsoft-Activision merger will not force PlayStation to close.

"In its response to the letter sent by SG, Sony reported that, in year 2021, Activision Blizzard represented [RESTRICTED ACCESS TO CADE] of total consumer spending on games and add-ons ("add-ons") in the PlayStation ecosystem globally, and only Call of Duty responded by [RESTRICTED ACCESS TO CADE].

"These percentages, although they are quite expressive, do not seem to reflect values ​​whose loss could effectively limit the ability of the console market leader in compete in the digital distribution segment, and they are certainly not sufficiently representative to the point of, by themselves, characterize the Activision Blizzard content as an "essential input" to the company's business.

Activision and Microsoft combined would be 14% of the global 2021 market.

Activision and Microsoft combined would be 14% of the global 2021 market.

It's important to note that CADE is primarily focused on how the deal would affect Brazilian consumers and the domestic Brazilian games market. Call of Duty is not very popular in Brazil, and neither Microsoft nor Activision-Blizzard have generated substantial revenues in the region. This, combined with the market share data that shows that the combination of Microsoft and Activision-Blizzard would still be around 14% of the total global video games market in terms of revenues compared throughout 2021, has led CADE to make the assertion that the Microsoft-Activision merger poses no immediate threat to neither competition nor consumers.

"For all of the foregoing, although it is recognized that an eventual exclusivity over the distribution of Activision Blizzard's content may give Microsoft a competitive advantage, there is no evidence that such an advantage can, by itself, harm the performance of third parties to the point of limit competition in the market for digital distribution of electronic games."

Activision confirms it made $1.32 billion from PlayStation in 2021.

Activision confirms it made $1.32 billion from PlayStation in 2021.

We have no way of knowing how much PlayStation makes from Call of Duty every year, but based on a standard 30% split commission applied to the revenue from external customers outlined here, PlayStation earned over $570 million from Activision-Blizzard products.

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NEWS SOURCE:sei.cade.gov.br

Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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